A Self-Invested Personal Pension (SIPP) is a type of pension that gives you more control over how your retirement money is invested. It’s a tax-advantaged account that functions like a traditional personal pension but with a wider choice of investments and more flexibility in how it’s managed. That control comes with more responsibility, and in some cases, higher risk. It suits people who want to take a more active role in their retirement savings, consolidate multiple pensions into one, or simply move beyond the limits of workplace schemes.
How SIPPs work
SIPPs are available to UK residents who want to contribute independently toward their retirement. They operate under the same basic pension rules: you can’t access the funds until age 55 (increasing to 57 from 2028), and you get tax relief on contributions — 20% automatically added for basic-rate taxpayers, with higher and additional rate taxpayers able to claim more through their tax return. The annual allowance is £60,000 or 100% of your earnings, whichever is lower. Growth within the SIPP is free from capital gains and income tax.
Withdrawals, once allowed, are subject to income tax — except for the 25% tax-free lump sum you can usually take. What happens after that depends on how you want to draw the money: lump sums, income drawdown, or annuities.
Investment choices
The core appeal of a SIPP is the investment range. While standard pensions usually limit you to a set list of funds or a handful of risk-rated portfolios, a SIPP opens the door to a broader selection. This includes:
- Individual stocks and shares
- Investment funds and trusts
- Corporate and government bonds
- Commercial property (with restrictions)
- ETFs, REITs, and other listed instruments
Not every provider offers the same access. Some SIPPs are full-featured, allowing direct stock purchases and commercial property, while others are lower-cost and offer only funds or ETFs. Choosing the right provider depends on how hands-on you want to be.
Who benefits most from a SIPP
SIPPs aren’t for everyone. If you’re just starting to save for retirement and have access to a good workplace scheme, that’s usually a better first move, especially with employer contributions. But SIPPs become useful in several situations:
- You’re self-employed and don’t have access to a workplace pension
- You want more say in how your pension is invested
- You have multiple old pensions and want to consolidate
- You want to hold specific assets not available in employer schemes
- You’ve maxed out other allowances (e.g., ISAs) and want additional tax-advantaged growth
For higher earners, SIPPs also offer planning flexibility — especially when combined with salary sacrifice or carried-forward allowances.
Risks and downsides
Control comes with consequences. A SIPP lets you make the right call — or the wrong one. Choosing poor investments, chasing returns, or overtrading can erode long-term growth. Market volatility affects SIPPs more directly because you decide the asset mix. There’s no built-in risk balancing unless you choose low-risk funds or use default allocations.
Fees vary too. Some providers charge flat fees, others percentage-based. You’ll pay for fund management, trading, and sometimes platform use. Costs can eat into returns, especially if your balance is small or your investments are actively managed.
Withdrawals must also be planned carefully. Just because you can access 25% tax-free doesn’t mean you should take it early. Income drawdown from a poorly performing portfolio can deplete funds faster than expected. Tax implications change depending on how you draw funds and what other income you’re receiving at the same time.
Managing a SIPP alongside other pensions
A SIPP doesn’t replace other pensions. It can be used alongside a workplace scheme or private plan. Many people use their SIPP for extra flexibility while keeping automatic contributions flowing into a workplace fund.
It also plays well with ISAs. Use your ISA for flexible, tax-free withdrawals at any time, and your SIPP for long-term, tax-efficient growth. When retirement approaches, drawing from both accounts in a balanced way can reduce tax liabilities and stretch your savings further.
Transferring into a SIPP
You can move other pensions into a SIPP, including defined contribution workplace pensions or other private pensions. The main reason to do this is control — if you’re unhappy with the performance, fees, or limited choices in your current plan.
However, transferring a defined benefit (final salary) pension into a SIPP is a different matter. These pensions come with guaranteed income and protections, and moving them into a SIPP often means giving those up. It’s usually not advised without a regulated financial adviser, and even then, most transfers of this kind are rejected due to the long-term loss of security.
Seen from Pension Gruber
Retirees who arrive with control over their money usually did some form of SIPP planning. They understand where their money is, what it’s doing, and how to access it on their terms. We’ve met guests who use SIPP income to fund regular stays, longer holidays, or even rent property while travelling.
On the other hand, we’ve also hosted people who moved pensions into SIPPs without understanding the risks — high fees, poor performance, or complexity that they weren’t prepared to handle. It’s not a bad product, but it’s not foolproof. A SIPP is only as smart as the person running it.
